Telecoms giant Vodafone suffered a 3.3 per cent drop in sales across the group as its Indian business came under increased pressure on pricing from rivals.
Group wide sales fell to £10.2billion in the first quarter, with revenue from its Indian operation slumping 13.9 per cent amid ‘continued price competition’.
Vodafone, the world’s second largest mobile operator, reported a £5.2bn annual loss in May after being forced to write £3.2bn off the value of its Indian unit after striking a deal to merge the business with competitor Idea Cellular to combat a mobile price war in the sub-continent country.
Sales decline: Telecoms giant Vodafone suffered a 3.3 per cent drop in sales across the group as its Indian business came under increased competition on pricing from rivals
In the UK, revenue slipped 4.5 per cent to £1.5bn as declining sales and the weakened pound took hold.
The deconsolidation of Vodafone Netherlands and foreign exchange movements also put a significant dent in the firm’s top line, while growth in Germany halved to 0.6 per cent.
However, demand for data packages and broadband have helped drive its business in Europe, with Vodafone’s operations in Spain and Italy reported robust growth, along with Africa, the Middle East and Asia, with sales rising 1.2 per cent, driven by a strong performance in Turkey (13.9 per cent service revenue increase) and Egypt (24.6 per cent).
The group’s service revenue was also up 2.2 per cent at £9.23bn, beating market forecasts of 1.4 to 1.9 per cent.
Vodafone added that it expects cash flow to jump this year, allowing it to increase dividends, as it cuts back on network investment, improves efficiency and tackles its Indian competition through the Idea Cellular merger.
Chief executive Vittorio Colao said: ‘We have made a good start to the year in Europe, where our commercial momentum remains robust, and growth accelerated across Africa, the Middle East and Asia Pacific.
‘Although competition in India remains intense, service revenues stabilised compared with the prior quarter.
Silver lining: Chief executive Vittorio Colao praised Vodafone’s performance in Europe and Africa, the Middle East and Asia Pacific
‘We are gaining profitable market share in broadband, and a growing proportion of our customers now take our fully converged offers.
‘Overall, this performance gives us confidence in reiterating our outlook for the year.’
Neil Wilson of ETX Capital said: ‘There were some really impressive numbers as the company benefits from consumers’ insatiable desire for data.’
‘For example Vodafone enjoyed a 39 per cent increase in data usage per smartphone customer in Europe.
‘Data traffic grew 63 per cent worldwide which is equivalent to all the quarterly data traffic two years ago.
‘Carriers are enjoying something of a boon in emerging market data usage as consumers upgrade mobile phones for smartphones.
‘This trend underpins a lot of the AMAP growth and showed itself in the split in Q1 organic service revenue growth of 0.8 per cent in Europe versus 7.9 per cent everywhere else, with Turkey and Egypt standout performers.’
Talking point: Vodafone enjoyed a 39 per cent increase in data usage per smartphone customer in Europe
He added: ‘Vodafone will be pleased it can exclude India from these results after its decision to combine the business Idea Cellular.
‘Despite adding 3.4million 3G/4G customers and seeing data usage double, fierce pricing competition led to a 13.9 per cent drop in organic service revenue.
‘Spinning it off was a smart move and one that will shield shareholders as the price war continues.’
Dhananjay Mirchandani, an analyst with Bernstein, said the performance was solid.
‘Underlying service revenue momentum excluding the impact of currencies is extremely promising especially in Southern Europe with the UK better than expectations,’ he said.
Rival BT posted a 19 per cent fall in pre-tax profits for the year to £2.35bn in May, although if one-off items worth £1.17bn are stripped out, profits rose five per cent.
Vodafone’s share price jumped two per cent in today’s early trading, taking it to the top of the FTSE100.
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